Opinion
Case No. 01-570-AJM-7, Adv. Pro. No. 01-046
January 17, 2001
R. Lee Money, Attorney for the Plaintiff.
John Teitenberg, Attorney for Defendant/successor in interest, ECMC.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Natalie Phillips, ("Phillips") the Debtor and Plaintiff, filed her Complaint to Determine Discharge of Student Loans (the "Complaint") against the Defendant, USA Group Loan Service, Inc. ("USA Group") on February 8, 2001. Educational Credit Management Corporation ("ECMC") is the assignee of United Student Aid Funds, Inc. and the proper party in interest. Trial on the complaint was held on August 16, 2001 wherein the Plaintiff appeared in person and by counsel, R. Lee Money; the Defendant, ECMC, appeared by counsel, John Teitenberg. The matter was taken under advisement at the conclusion of the trial and, to the extent they had not done so as of the trial date, the parties were given the option of submitting proposed findings of fact and conclusions of law within seven (7) days. The Court has received the proposed findings and conclusions from the parties.
The Defendant has been referred to in pleadings as "USA Group Loan Services", and "USA Group Loan Services, Inc.".
ECMC's answer filed on March 22, 2001 recites that ECMC is the "assignee of United Student Aid Funds, Inc.". Whether the originally-named defendant USA Group Loan Services sold the loan and assigned its rights thereunder to United Student Aid Funds, Inc. is not apparent from the record; however, this issue apparently is moot since the Plaintiff did not dispute that ECMC is the proper party in interest to defend this adversary.
These findings and conclusions are in accordance with Rule 7052 of the Federal Rules of Bankruptcy Procedure (F.R.Bank. P).
FINDINGS OF FACT
(1) Between August 1992 and December 1996 Phillips attended Indiana University — Purdue University at Indianapolis. She studied Nursing, then Secondary Education, and then withdrew or was prohibited from taking classes due to failing grades in December of 1996 and did not obtain a degree. She accumulated several loans which she consolidated in March of 1998 for a total amount of approximately $15,359.
(2) At the time of her withdrawal, Phillips appears to have been experiencing medical problems and possibly depression, although upon her withdrawal in December of 1996, she obtained employment in January of 1997 with Gallagher Bassett Services and worked there satisfactorily until March of 1999 when the company began downsizing.
(3) Phillips obtained employment with Kelly Scientific at DOW AgroSciences in April 1999 until obtaining her present position at Harlan Sprague Dawley, Inc. in or about October of 2000.
(4) Phillips concurrently enrolled at ITT Tech in November of 1998 to obtain an Associates Degree in Chemical Technology while still maintaining her employment. She maintain a 3.5 grade-point average over 4 semesters, but withdrew from her classes in December of 1999 and did not obtain a degree. To help finance her tuition, Phillips obtained an additional $9,126 in federally guaranteed student loans.
(5) Phillips repaid a total of approximately $1,500 of the student loan debt, at various times, over the last 5 years. The debt, including principal and interest, now amounts to approximately $26,000.
(6) Phillips is a single, 27 year old female. She resides with a roommate with whom she splits several expenses, including rent and utilities. She testified that she repays her roommate for these expenses partially by check and partially in cash.
(7) Summaries of Phillips' monthly expenses have been presented to the Court in Plaintiff's Exhibit 1 and ECMC's Exhibit F. Some documentary evidence has been presented to the Court in ECMC's Exhibit D, including one electricity bill, a cell phone bill, a home phone bill, and renter's and auto insurance bills. ECMC's Exhibit G also consists of checks which verify Phillips' payment of her half of rent, or $347.50. No other original documentation of her expenses was introduced into evidence.
(8) Phillips plans to earn approximately $24,400 for the year 2001. This has increased from $15,500 in 1998, $9,000 in 1999 while she was taking classes, and $19,900 in 2000.
(9) Phillips never completed her courses of study and therefore did not obtain a degree. She does, however, have several skills and significant experience which likely make her attractive to potential employers. These skills include Microsoft Word, FileMaker Pro, Microsoft Excel, Microsoft PowerPoint and Microsoft Outlook. She also claims to possess excellent organizational skills.
(10) Phillips has several medical conditions which she developed during the time she attended Indiana University. She has since been diagnosed with Polycystic Ovarian Syndrome and Congenital Adrenal Hyperplasia. These are long-term conditions, but are controlled through the use of prescription medication that she takes on a regular basis. No evidence was introduced that would suggest these conditions now affect her ability to earn an income, nor was evidence introduced to suggest that these conditions will affect her future ability to earn an income.
(11) Before being diagnosed with these conditions, the Plaintiff claims to have suffered from depression. She claims that a family practitioner, who is also a family friend, diagnosed her and gave her prescription medicine for depression. No documentary evidence describing the nature or extent of the depression was introduced into evidence. Phillips testified that she switched concentrations of study from Nursing to Secondary Education in an effort to improve her grades despite the depression. Phillips testified that after she withdrew from her courses in December 1996 allegedly as a result of the depression, she was able to obtain employment with Gallagher Bassett in January of 1997 and retain that employment for over two years.
(12) Although Phillips testified that she fears that she may have future medical problems as a result of her conditions, there was no medical proof to suggest that this was probable, or that any such future medical problems would affect Phillip's ability to earn an income.
(13) In fact, the evidence reflected that both her medical and employment situations have been ameliorating over the last few years. She testified that she had not taken medication for depression in several years. Her other conditions are being treated such that they do not have an apparent impact on her employment. The costs of treating and monitoring theses conditions does not appear to cripple her ability to maintain a "minimal" standard of living. In addition, Phillips' income has been increasing over the last two years and she currently earns more than she has ever earned.
(14) Phillips filed voluntary Chapter 7 Petition on January 17, 2001. Phillips then instituted this Adversary Proceeding to determine the dischargeability of student loan debts, pursuant to 11 U.S.C. § 523(a)(8), alleging that the debt should be discharged because payment of it would impose an undue hardship.
CONCLUSIONS OF LAW
(1) Pursuant to 11 U.S.C. § 523(a)(8), the Court may discharge an otherwise nondischargeable student loan if excepting the debt from discharge will impose an undue hardship on the debtor or the debtor's dependents.
(2) Phillips had the burden of proving that she qualifies for a "hardship discharge." In re Roberson, 999 F.2d 1132, 1137 (7th Cir. 1993), citing In re Webb, 132 B.R. 199, 201 (Bankr.M.D.Fla. 1991); In re Ealy, 78 B.R. 897, 898 (Bankr.C.D.Ill. 1987). Phillips failed to carry this burden of proof.
(3) The test used in the Seventh Circuit on hardship discharge requires the debtor to demonstrate:
(a) that the debtor cannot maintain, based on current income and expenses, a "minimal" standard of living for herself and her dependents if forced to repay the loans;
(b) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and
(c) that the debtor has made a good faith effort to repay the loans. Roberson, 999 F.2d at 1135.
(4) Phillips failed to prove that she cannot maintain, based on current income and expenses, a "minimal" standard of living for herself. Phillips failed to adequately explain the allocation of her expenses and why some of those expenses contained items or charges that were suggestive of a lifestyle beyond that of a "minimal" standard of living. Her current income is not unrepresentative of even persons her age who have obtained degrees in a particular field.
(5) There is no evidence that there is additional circumstances that exist that will persist for a significant portion of the repayment period. Although she never obtained a degree, Phillips has shown that she has several skills marketable to employers and has failed to show that there is any indication that her employment situation will not remain the same or continue to improve. She has also failed to show that at the very least she is now unable to resume her pursuit of a degree in Chemical Technology or use her credits in those courses to pursue a related degree. She has failed to show that she is suffering from any physical or mental disability that will interfere with her employment or her ability to obtain employment should the need arise. In fact, the evidence at trial indicates that she currently is employed at a rate which is the highest salary she has ever earned, and no credible evidence was presented to suggest that her current employment was likely to be involuntarily terminated.
(6) Nor has Phillips made a good faith effort to repay her loans. Although, as noted above, she did make some payments on her federally guaranteed student loan debt, the evidence indicates that she also took on a number of self-imposed hardships during the repayment period, and chose not to use such funds to repay her loans. Her monthly expenses also indicate that she continues to assume self-imposed hardships which are not indicative of the inability to maintain a standard of living so deficient so as to obtain a discharge for undue hardship.
(7) The Court concludes that given the evidence presented, Phillips fails on all three prongs of the Roberson test, and therefore, she has not carried her burden in establishing that payment of the student loans owed to ECMC would impose an undue hardship to her. Accordingly, the Court concludes that said loans are nondischargeable under 11 U.S.C. § 523(a)(8).
(8) The appropriate judgment entry follows.